29 Oct 2015

Moody’s Investor Services
has given India a positive rating outlook based on GDP growth in the 7-7.5%
range, favourable government policy action and low exposure to external shocks
due to RBI actions. Standard & Poors maintained its current rating of BBB-
but said that the prospects for a future upgrade were good as better
policy-making is boosting the prospects for growth and fiscal performance.
Following the weak monsoon, the government has imposed stock limits pulses to
prevent hoarding by warehousemen and intermediaries and price manipulation
which may affect the inflation outlook. The market outlook is now
fixed on the quarterly results, which are largely neutral.

28 Oct 2015

Infosys and Huawei of China
will cooperate in joint venture to launch a “smart stadium solution” to provide
WiFi and smart services in stadia and exhibition centres. Infosys also
announced the acquisition of Noah Consulting, a specialist provider of
information technology consultancy services to the oil and gas industries. The
consideration is $70mil. Nestle India has received test results for 90 Maggi
noodle products from the three centres mandated by the Bombay High Court. All
results fell well within statutory limits for additives, including lead. The
state of Gujarat has lifted it ban on Maggi products as a result.

27 Oct 2015

HCL Tech numbers reflected
the weak first half seen across the sector. Sales were up by 7.3% but profits
fell by 16.5%, largely attributable to a single client issue. HCLT’s guidance, however, was
optimistic. The company announced two acquisitions. In the first place, it has
agreed to acquire the IT outsourcing business of Sweden’s Volvo. Volvo is in
the course of a $1.2bn restructuring, which will see 2,600 staff transferred to
HCLT for a payment of $100mil. In the second, the company also announced the
acquisition of Concept to Silicone Systems of Bangalore, a private software
services business, for an undisclosed sum.

26 Oct 2015

The second quarter results
season accelerated, with the balance of results fairly even: the majority of
announcements so far are inline with expectations. Ultratech Cements reported
revenues 5% ahead in conditions of soft demand. Yet profits narrowed by 4%
mostly due to the effects of the District Mineral Foundation levy introduced
under the Mining Act 2015. Agro Tech Foods managed to grow revenues by 1.7% but
profits fell by 35.6%. South
Indian Bank reported net interest income up by 8% and profits ahead by 22%.
HDFC Bank was as reliable as usual, reporting NII ahead by 21.2% and profits by
over 20%. Bajaj Auto reported sales ahead by 2.3% and profits by nearly 58%.
The company will roll out four new bikes to support its plan to get to 22%
market share. In the first half of FY16, total motorcycle sales fell by over 4%
as th weak monsoon softened rural demand. Bajaj Auto sales rose by 0.3% in the
sale period.

25 Oct 2015

Total foreign portfolio investment into Indian markets this calendar year to-date has amounted to just $10.3bn. Some 62% of this has been into the debt market, a number consistent with previous periods. Evolving RBI policy is highly supportive of the domestic debt market. The decisions of the monetary policy committee at its September 29th review included one committing to more than double the limit for foreign portfolio investment in debt over the next couple of years. Evidently, the next step in this direction may involve extending the limit to cover states’ debt, of which there is more than $200bn in issue. The yield on Indian government debt, around 7%, looks attractive to foreign portfolio investors, especially as the RBI actions have brought appreciation of the Rupee.

At the last minute this
week, the Chinese central bank joined the monetary easing party by cutting
interest rates and providing a boost to equity market sentiment across the
globe. Optimism about quarterly earnings also helped. In India, the Nifty shook
off a weak start last week to add 57 points for the full week. Closing 0.7% up at 8295 after
trading in a range of 1.1% Average daily trading volumes softened to $2.5bn in
a holiday shortened week, with FPIs continuing to sell, this week a net $279mil
while domestic institutions were net buyers of a net $100mil. Market breadth
was narrow, with advances and declines even. Volatility was mostly easy, with
the India VIX mostly trading to the downside but then closing back where it
opened at 16. A mixed reporting season failed to support the previous week’s
optimism in the Nifty futures and the premium to cash slipped back to 1.1%

22 Oct 2015

The second quarter results season kicked off with Infosys reporting revenues ahead by 17.2% year on year and profits up by 9.8%; this was a strong result but forward guidance was cut to a range of 6.9-8%. The US market continues to be crucial as the company continues to shift up the gears with strong execution. TCS reported revenue and profits growth of just over 14% year on year, with strength in all geographic areas.
In company news, ICICI Bank has launched mVisa, an electronic payment service for smartphones which can be used in stores, e-commerce sites, home delivery, as well as for paying for radio taxis and utility bills. Lupin has agreed a strategic alliance with Boehringer Ingelheim of Germany to market its Linagliptin DPP-4 Inhibitor in India. Boehringer Ingelheim is a global layer in diabetes drug formulations.

19 Oct 2015

Late data reports show indirect taxation collection running nearly 36% ahead so far this year at $50bn; this growth rate is double the rate required to meet full-year budget targets. The CPI has moved up to 4.4% as favourable base effects pass through but food inflations remains subdued at 4.3% in spite of the poor monsoon. WPI inflation was negative for the eleventh successive month at -4.5%. The August Index of Industrial Production grew by 6.4%, a major positive surprise compared to expectations in the 4-5% range. Capital Goods production was the big contributor with 21.8% growth, followed by consumer durables which grew by 17%. Power generation grew by 5.6% and mining production by 3.8%.
The government will provide a one-off injection of $135mil for build-operate transfer road projects which have been stalled since the Congress government. With evidence of strengthening underlying economic activity and government commitment to public sector investment, sustained GDP growth seems to be assured at the 7-8% level. This should support Indian equity markets which are already strongly underpinned by monetary policy and decisive action to strengthen India’s external position.

The overall picture of liquidity flows on the Indian capital account now is of portfolio investment slowing but FDI increasing steadily. Domestically, private sector capital investment remains stagnant but domestic portfolio investment in the equity markets has seen sustained growth this year. Domestic mutual funds have seen net inflows in September for the seventeenth consecutive month even though markets retreated by 6.5% in August and by 0.5% in local currency terms. Year-to-date net inflows have reached $12.9bn., notably exceeding foreign inflows, a landmark support signal.
The second quarter results season kicked off with Infosys reporting revenues ahead by 17.2% year on year and profits up by 9.8%; this was a strong result but forward guidance was cut to a range of 6.9-8%. The US market continues to be crucial as the company continues to shift up the gears with strong execution. TCS reported revenue and profits growth of just over 14% year on year, with strength in all geographic areas.

Following the FOMC decision not to raise US interest rates, some surprisingly weak economic data emerged, notably weak payroll numbers, combined with a downward revision of the previous month’s figure. In response, markets have pushed US monetary tightening forecasts late into next year. This eased back the recent risk aversion and equity markets stabilised. In India, the Nifty has added 229 points to move 2.1% up t0 8180 after trading in a range of 3%. Average daily trading volumes were $2.7bn but foreign investors continued to be net sellers, of $394mil in cash equity. Domestic institutions were net buyers, on the other hand, investing a net $207mil. Market breadth was modest as advances were slightly ahead of declines. Volatility subsided again, the India VIX trading in thee high teens before closing 17 for a loss of two points. Nifty futures closed at a premium of 2% to cash.

7 Oct 2015

Infosys has won the
contract to build and maintain the backbone operating network nationwide for
the implementation of GST. The contract is for five years and is worth $200mil.
The network is to be implemented in time for the scheduled launch date of April
1, 2016. TCS is in partnership with UK building society Nationwide to provide
the Ignio Neural Automation System for batch performance and capacity
management. HCL Techno has launched its digital service exchange platform which
allows clients to request and recall services efficiently. The company also
issued guidance on earnings this quarter, indicating a weak quarter due to
currency movements, a customer issue which led to a $20mil revenue reversal and
longer lead times on new business negotiations.

6 Oct 2015

Ultratech Cement has been
busy with new capacity additions: it has commissioned 1.6mtpa of new capacity
at Jajjhar in Haryana and the same at Dankuni in West Bengal, just 40km from
Kolkata, bringing total installed capacity to 64.7mtpa in fourteen plants. The
company has also commissioned a 2mtpa terminal in Pune in Maharashthra.
Kalpataru Power’s JMC Projects division has been awarded $100mil in engineering,
procuring and construction projects. Bajaj Auto has received type approval for
the EU for its RE60 quadricycle before it has received clearance for the
domestic market. The EU certification was done by the Bangalore subsidiary of
TUV Rheinland of Germany. Nestle has terminated its sole remaining third party
producer of Maggi noodles; it will not be outsourcing any production in future.

The SBI Composite Index for
September 2015 was 53.9, an advance on 53.4 the previous month, confirming a
pick-up in economic momentum, substantially in manufacturing. Mining production
and power generation continue to be soft, however. Fuel duty hikes of petrol
and diesel boosted fiscal revenue by some $4.6bn so far this fiscal year. The fiscal deficit in the first five
months was $56.3bn, 66.5% of the budget target for this year; the comparable
level for the same time last year was 75%. This year has been helped by a jump
in gross tax receipts of 40% in August, compared to a running rate increase of
18% in the four previous months. The main contributors were corporate and
personal tax payments.

5 Oct 2015

The RBI made a surprisingly
aggressive contribution to stimulating the economy at its regular monetary
policy review on September 29th. Surprising the market, they cut the
repo rate by fifty basis points, twice the consensus expectation. Furthermore,
they announced that to lubricate the transmission mechanism for the stimulus,
they would cut the Strategic Liquidity Reserve (SLR) of the banks by 25 basis
points a quarter from its current level of 21.5% until March 2017. They will
also relax the limit for foreign portfolio investment in Indian bonds from the
current $23.2bn to $49bn between now and March 2018. This is highly supportive
for the Rupee, which duly added 1.5% after the announcement. Foreign reserves
stand at a healthy $352bn. The inflation forecast has been revised down to 5.8%
in January 2016 and the governor gave guidance for future repo rate action by
setting a target for real interest rates of 1.5-2%.

The markets will be
propelled by the repo rate cuts for the time being; this month’s second quarter
results season is not likely to inspire. Yet the pace of government expenditure
on infrastructure is clearly picking up and will be a key driver of growth in the
absence of external momentum.

4 Oct 2015

At the end of two
holiday-shortened weeks Indian markets have more or less moved sideways.
External weakness dominated at first but a jolt of monetary stimulus halted a
slide and restored upward momentum. The Nifty ended the period down 31 points
at 7951, for a loss of just 0.4% after trading in a range of 4.3%. Average
daily trading volumes were soft, just under $3bn, below the twelve-month
trailing average. Foreign portfolio investors continued to sell cash equity,
withdrawing some $500mil as domestic institutions bought a net $460mil.
Volatility was, well, volatile, as the India Vix swung between a high of 24 and
a low of 17 before settling at 19 for a gain of a point. Market breadth was
strong overall with advances ahead of declines by three to one, thanks to a
late surge of buying. With a
degree of optimism restored, Nifty futures closed at a premium of 1.3% to cash.

About Himalayan Fund NV

The Himalayan Fund N.V. is an investment company with its primary objective to generate long-term capital gains for shareholders by investing in India.

This blog shares with you interesting, weekly news about the Indian economy. It provides insights about the financial situation in India and its market. The team of Himalayan Fund offers knowledge about investment opportunities relating to India.

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